FEDERAL BUDGET 2014: Poor face most pain

By
MARK KENNY

May 14, 2014, midnight

EDUCATION, health, aid, the biggest losers.

AN unprecedented $80 billion cut to health and education spending over a decade leads a list of tough measures hitting age pensioners, concession card holders, families and people on the disability support pension.

The budget document lived up to its dire pre-publicity, offering little good news other than a $20 billion medical research fund — to come from a $5 contribution by patients when visiting the doctor. Each visit will cost $7, with the other $2 going to the doctor.

The research fund is expected to reach $20 billion within six years and be the largest such fund in the world.

The government put its management credentials above meeting its election promise of no new or increased taxes, and no cuts to health and education.

It has gambled that Australians will reward it later for fixing the balance sheet.

Much of the pain has been delayed for a time when growth is likely to be stronger.

High earners are hit with a 2 per cent “temporary budget-repair levy” to raise $3.1 billion in three years from July 1.

But the real — and permanent — pain will be felt by those with the least to give.

Age pensioners and those on disability support pensions will have their meagre incomes indexed at a lower rate — the consumer price index rather than the higher rate of wage inflation.

Eligibility to a raft of payments will be tightened with indexation of income thresholds paused for two or three years.

Treasurer Joe Hockey argued lower indexation simply slowed the rate of growth, while maintaining purchasing power, and was not a cut.

He said the budget was a chance for “all of us to contribute and build”.

The budget sets a timeline for reducing the deficit from $49.9 billion to $17.1 billion next financial year and less $3 billion in the final year of the four-year budget cycle.

It represents a faster path to surplus and raises the possibility of reaching the psychologically — and politically — important balanced budget even earlier than 2018-19.

He said the age of entitlement had been replaced not with “an age of austerity, but with an age of opportunity”.

Mr Abbott’s signature paid parental leave scheme, while scaled back to a maximum half-year salary replacement on $100,000, stands out against a budget heavy on cuts and sacrifice especially among the poor.

Among big losers are public broadcasters, the ABC and SBS. Despite a promise of no cuts, they lose $43 million over four years.

“Soft diplomacy” efforts in the region via the Australia Network operated by the ABC will be closed from July 1 for a four-year saving of $198 million.

Development aid is slashed to save $601 million next year, climbing to more than $3.5 billion in 2017-18 – the largest single saving in the budget.

Yet even bigger savings will be booked longer term from winding in federal payments to the states for health and eduction — in direct breach of a Mr Abbott’s mantra when Opposition Leader of no cuts to health and education.

GOOD FOR ECONOMICS BUT WEAK ON FAIRNESS (Ross Gittins)

THIS budget isn’t as bad as Labor will claim and the Liberal heartland will privately think.

It’s is the toughest budget since John Howard’s post-election budget in 1996, but it’s hardly austerity economics.

I give Joe Hockey’s first budgetary exam a distinction on management of the macro economy, a credit on micro-economic reform and a fail on fairness.

Although Hockey has laboured hard to ensure few sections of the community escape unscathed, the truth is most of us have been let off lightly.

Only those people right at the bottom of the ladder have been hit hard – unemployed young people, the sick, poor and, eventually, aged and disabled pensioners – but who cares about them? We’ve been trained to worry only about ourselves, and to shout and scream over the slightest scratch.

Someone in the top 4 per cent of taxpayers on $200,000 a year will be wailing over the extra $7.70 a week they’ll be paying in tax. A single-income couple with kids will be losing a lot more than that, while someone under 30 denied the dole for the first six months will lose $255 a week.

And everyone will be angry about the resumption of the indexation of fuel excise, so worked up they forget it will raise the price of a litre of petrol by about one cent a year.

Anyone surprised and shocked by the budget can be excused only if this election was their first.

Any experienced voter who was persuaded that ‘’Ju-liar’’ Gillard was the first and last prime minister to break an election promise should pay their $7 and ask a GP to check for amnesia.

If you thought a man who could promise ‘’no surprises, no excuses’’ could be trusted to keep his word, more fool you.

Any experienced voter who didn’t foresee that changing the government would mean this year’s budget was a stinker isn’t paying enough attention.

Labor supporters want to believe that because Hockey and Tony Abbott are exaggerating about a ‘’budget emergency’’ and ‘’tsunami of government spending’’, we don’t really have a problem. They are refusing to face reality.

After running budget deficits for six years in a row, we faced the prospect of at least another decade of deficits unless Hockey took steps to bring government spending and revenue back together.

Failure to make tough decisions wouldn’t have turned us into Greece, but since when was that the most we aspired to?

This budget is Abbott’s admission his claim to be able to balance the budget without increasing taxes was wishful thinking.

The Liberal heartland, however, schooled for years to give its selfishness free rein, is having trouble facing this reality.

Hockey’s problem was that, with the economy weak and big declines in spending on mining construction still to come, sharp cuts in government spending or big rises in taxes could have slowed the economy to a crawl.

This is why some of the biggest savings announced – particularly on the age pension – have been timed not to take effect until 2017.

It’s also why he put so much emphasis on raising infrastructure spending.

The economy is expected to be a lot stronger by the time last night’s measures take full effect.

This is what wins Hockey high marks for macro-economic management.

He claims his reforms will improve the economy’s performance.

His best measures are increased competition bet- ween universities, the concessional loans to TAFE students, and the grants to encourage youngsters to complete apprenticeships and employment of people over 50.

But some measures are likely to make things worse rather than better.

The $7 patient co-payment for GP visits and tests is likely to discourage visits — more by the poor than the rest of us — but if it dissuades people from seeking help until their medical problems are acute it may cost more than it saves.

The tighter means-testing and less generous indexation of pensions will be defensible only if the planned review of the tax system leads to big reductions in superannuation tax concessions going to retirees far too well off to get the pension.